Interesting Facts on Marriage and Money

MSN Money lists some interesting facts on marriage and money as follows:

• The median net worth of married-couple households in the latest Census Bureau wealth study, conducted in 2002, was $101,975. For single men, median wealth was $23,700. For single women, $20,217.

• A 15-year study of 9,000 people found that during that time, people who married and stayed married built up nearly twice the net worth of people who stayed single. Even when all other factors are held constant -- stuff like income and education -- just the fact that they were married contributed to a 4% annual rise in these couples' wealth.

• Wealth declines typically started four years before a divorce was final, and the breakup ultimately reduced the typical person's net worth by 77% of that of the average single person.

The piece also suggests how you should handle the "business" side of marriage, but that wasn't nearly as interesting to me as the facts above.

Here are a few thoughts I had on the numbers they presented:

1. I wonder if they factored in age when the compared marrieds versus singles. A good portion of single people are young and thus likely to earn less than (married) people more established in their careers. I know we've said that income doesn't equal net worth, but it sure does give a person a good head start.

2. The second set of facts seems the most powerful to me. Seems pretty clear that marriage does lead to a rise in net worth. Maybe it's because major expenses like housing are split among two people versus being totally paid by one person. Think this could be the cause for at least part of the 4% increase?

3. Ouch! Divorce can lead to a huge financial hit. My thought is that the declining finances for four years probably contributed to the divorce. Then, once the divorce occurs, each person takes another financial hit. Make sense?

Comments

[Moneymonk]

This why most men stay married, simply because they do not want the child support and big blow to their wealth

[Andy]

This is why most men stay married? Are you serious? Did you just pull that statement from your arse? That seems pretty ridiculous to me.

[Adam]

I'm confused about this paragraph:

The median net worth of married-couple households in the latest Census Bureau wealth study, conducted in 2002, was $101,975. For single men, median wealth was $23,700. For single women, $20,217.

Is median net worth the same as median wealth? I think those are 2 completely different terms, so why are they comparing them together?

[WiseMoneyMatters]

Ya, sorry MoneyMonk. That statement was ridiculous. I personally stay married because I love my wife. It may seem a little crazy to you but it's true.

[ken]

I'm curious about this one.

"A 15-year study of 9,000 people found that during that time, people who married and stayed married built up nearly twice the net worth of people who stayed single. Even when all other factors are held constant -- stuff like income and education -- just the fact that they were married contributed to a 4% annual rise in these couples' wealth."

So does the couple have twice the net worth of a single person, or does each person have double the net worth of a single person?

Cause the couple together should have more than 2x the net worth of one single person.

[Mike]

I would add the following to what you said

1. Divorce is probably one of the biggest traps for losing wealth. Not only do you lose shared living expenses, you're emotionally unstable and more likely to make poor financial decisions afterwards (and before according to the article). Most people will also then try to make up for what they didn't have during the unhappy marriage as well. She'll go buy a new wardrobe and get her hair and nails done more frequently. He'll buy every expensive toy/gadget he can think of that will fit in his new one bedroom apartment that he just moved into. Don't forget the sports car. These behaviors will then probably continue for years until they're emotionally ready to move on and by then it will probably be too late to start accumulating a large amount of wealth.

2. Economics of Scale: Simply, you don't double your expenses by living together. You're bound to get further ahead on that alone.

3. Specialization: Each of you can do what is the most 'profitable'. I make more than my girlfriend does, hence it makes a lot more sense for me to work and her to stay at home and watch our 1 1/2 year old until her pay would exceed the cost of childcare and other costs of employment. Separated, we would be more constrained by time, money, and other factors that would limit our income making potential.

4. Most married people have kids, once you do that you feel more inclined to save or have more of a nest egg. When you're single and you die, who cares? But if you're married with kids, that changes things

The Millionaire Next Door also contains a lot of good information on family unit of the wealthy and how they operate, so I would recommend that if you haven't read it also.

[Meg]

I think people who choose to get married are more likely to be people who choose to do other socially traditional/responsible things like buy a house and contribute to retirement funds.

Besides that, many people just don't get serious about saving or investing until they get married. Maybe it has something to do with being accountable to someone else, or maybe it's just that you feel more obligated to be responsible about such things once you're officially a married "adult."

On top of all that the shared expenses like housing really are an advantage, perhaps even moreso than just having roomates or cohabiting. So it makes sense to me that married people save more and have higher net worths even than two single people combined.

[moneyguru]

"I think people who choose to get married are more likely to be people who choose to do other socially traditional/responsible things like buy a house and contribute to retirement funds."
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An absolutely ridiculous statement from previous post. Being married does not necessarily equal socially responsible or fiscally responsible people (vs. those who remain single). I know far more couples who overspend and haven't thought about 'saving' for a rainy-day (retirement) than those who have their ducks lined up. In many cases, men typically make more dollar-for-dollar than woman do and thus a married couple will have the opportunity to earn (save) more potentially than single individuals.

[Chaturon "Chubracabra" Wattaporn]

"I think people who choose to get married are more likely to be people who choose to do other socially traditional/responsible things like buy a house and contribute to retirement funds."
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Don't forget: "Marriage is the number one cause of divorce!"

So with divorce rates greater than 50% and with divorce "ultimately reducing the typical person's net worth by 77% of that of the average single person," that's a lot of dumbasses who "responsibly" married . . . and ultimately devastated their networth (let alone happiness). Then add in the people who stay married to hold onto their money!

In this economy, it's a practical matter - stay together because 2 can live cheaper than 1.